Archive for March, 2009

Vice Squad!

Interesting story on the radio this morning – it seems that theft of car stereos, which was rampant in the 1980s and 1990s, pretty much doesn’t happen anymore.  Why?  Because most cars now come with excellent built-in sound systems.  These cars don’t need an upgrade, and the stereos in them, if stolen, won’t fit anywhere other than in the cars they were stolen from in the first place.  And for the few people who still want an aftermarket car stereo, very good ones are now available for about $100.

The combined result of these factors?  Virtual elimination of demand for stolen car stereos.

This reinforces something I’ve believed for a long time.  As far as I know, there is no example of any form of what I’ll call ‘vice’ (i.e., widespread social misbehavior) being eliminated at its source.  Why?  Because it’s always both easier and cheaper for purveyors of vice to find ways around new obstacles than it is for authorities to erect them.  The only way to make a vice go away is to eliminate demand for it. This means attacking the problem at the point of consumption, not the point of origin.

Take illegal drug trafficking, which was in the news today, too, this time with a focus on Mexico.   Years of efforts to disrupt supply lines have not made the problem go away.   Adoption of the Saudi justice system would, but we’re not going to do that.  So how might we make a meaningful dent in demand for illicit drugs?

I don’t have the answer to that (I wish I did).  But here are a couple of ‘vices’ I have thought about, and possible demand-oriented solutions to them:

  • Political Influence of Campaign Contributions:   Eliminate most of the need for money by banning political advertising on television.  (I think this would be constitutional because while we can’t limit what people say, there is precedent for limiting where they’re allowed to say it.  I should point out, however, that everyone I’ve mentioned this to, especially lawyers, disagrees with me.)
  • SPAM:  This one is easy and not my idea, although I am a big advocate for it.  Make unrecognized senders verify their identity; give recipients the ability to see the verification and accept or reject the sender.  (I will have more to say about this in a subsequent post.)

Now it’s your turn.  What demand-eliminating solutions can you suggest to some of our better vices?  Please leave a comment and let me know!

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AIG: Who Knew? (Not the People Who Should)

If you haven’t been following the Daily Show vs. CNBC feud, it’s great entertainment.  If we could just find a way to add back to the Dow all the points Jon Stewart has been racking up, the recession would be over.  A year or so ago, Tom Friedman of the New York Times pointed out that we now get our best news from comedy shows, while supposed news shows (he appropriately singled out the shameless Lou Dobbs) purvey distortion and misinformation (read his column).  I’m afraid he was right.

So two days ago, I was working out and listening to MSNBC’s Morning Joe.  They had CNBC anchor Maria Bartiromo on to provide an “informed” perspective on the AIG bonus controversy.  Here’s what I learned:

  1. She had no viewpoint on the bonuses and it was painful to watch her scrounge for one (right answer given her job: “It looks and is awful, but it’s also two tenths of one percent of the bailout money AIG has received.  We have bigger fish to fry.”)
  2. Neither she nor anyone else on the program had a clue what a credit default swap is, which is pretty appalling since these bad boys are at the core of the meltdown.  If your job is explaining what’s going on in the economy and you don’t understand what’s going on, how are you going to do your job?

The basics of this aren’t that complicated.  A credit default swap is a contract in which you pay me a small amount of money and in return I promise that if a particular bond defaults, I will pay you the face value of the bond.  If you own the bond, this is called “insurance.”  If you don’t, it’s called “gambling.”  There are about $50 trillion dollars of these bets floating around.  AIG ran by far the biggest casino.  The government bailed it out in order to enable it to make good on these obligations, believing that if AIG defaulted, the institutions that it failed to pay would collapse.  I’m not sure that’s true since many or most of these obligations stem from “gambling” rather than “insurance”.  But that was the government’s rationale.

The collective cluelessness on MSNBC became clear when the discussion turned to outrage over the fact that a big chunk of AIG bailout money is going to find it’s way to Goldman Sachs.  Ms Bartiromo looked ashamed when she acknowledged that this was something she already new.  But she was not able to explain the obvious – AIG owes that money to Goldman because Goldman bought a bunch of now-in-the money credit default swaps from AIG.

In truth, I really don’t expect sharp insight on the meltdown from Ms. Bartiromo, let alone the mostly-political wags on MSNBC.  I do, however, expect it from the Wall Street Journal.  So I was surprised to see this headline on yesterday’s front page:  Hedge Funds May Get AIG Cash.   It seems that through crack investigative reporting, the Journal has learned that a bunch of hedge funds shorted the housing market by buying credit default swaps from. . .wait for it. . .AIG.

I’m reminded of Captain Renault standing in Rick’s and declaring, “I’m shocked, shocked to find that gambling is going on in here!”  I’m also left wondering how we as a country are going figure out constructive, rather than knee-jerk, reactions to this mess when the people who are supposed to inform us about it clearly don’t understand it themselves.

More on Education

Last week, I said that I’m not sure the standardized tests our kids take today help very much, and suggested that maybe we should go on strike – simply not send our kids to school to take them.

Well, today, my daughter started taking hers (no, I didn’t keep her home).  I was surprised to learn that her school (apparently along with many) prohibits students from reading if they finish these tests early.  Evidently, there is some evidence or belief that students will rush through the test in order to get back to their books, and that this will lower scores.

I told her not to worry about it, and assured her that I’ll be OK if I get a phone call from the vice-principal saying, “Sir, we caught your daughter reading in school.”

While we’re on the subject of education, here’s some more interesting reading:

1) How well you do depends largely on how well you think you’re going to do.  Go to article. . .

2) Recess improves grades.  Go to article. . .

The second article is not a surprise.  Harvard psychiatrist John Ratey has done extensive research, some right here in Naperville, on the impact of exercise on mood, attention, cognitive performance and learning (see http://www.johnratey.com/newsite/index.html).  He concludes roughly that:

0.5Hr Serious Exercise = (1Prozac + 1Ritalin + 1Grade Level)

I started paying attention to this a few years ago, when I did some work in the arena of for-profit education.  In addition to exercise, blood-sugar levels also make a difference.  Exercise and breakfast are not substitutes for great teachers, but they matter.  It turns out that if a school wants to increase student performance by a grade level or two, running them ragged for half an hour first thing in the morning, then feeding them a big bowl of oatmeal actually is a good way to start.

Name That Dog!

There’s a rumor floating around that the Obamas are going to adopt a 3-legged dog.

See: http://latimes.com/thedishrag/2009/02/will-a-portague.html

I wonder if they’ll name it “Economy.”


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